Why manufacturing increased slightly despite adverse weather

The Kansas City Fed’s monthly Survey of Tenth District Manufacturers provides information on current manufacturing activity in the Tenth Federal Reserve District. The survey monitors factories selected according to geographic distribution, industry mix, and size. Survey results show changes in manufacturing activity, including production and shipments, and monitor both price changes of raw materials and finished products.

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The survey results for this month were released on Thursday, February 27. February’s survey results indicated that manufacturing activity in February grew slightly in the Tenth District, moving to four from a reading of five in January. The survey reported that production of non-durable goods fell (especially food and beverage), while durable goods production increased slightly.

The production index jumped from negative eight to three, and the shipments index also climbed higher. The order backlog and employment indexes decreased slightly, while the new orders index was unchanged.

“The story in February was similar to January,” said Chad Wilkerson, vice president and economist at the Kansas City Fed. “Regional factory activity was held back somewhat by unusually harsh weather, but still managed to grow modestly.”

Firms report lower or stable prices

The month-over-month raw materials price index moved down from 19 to 16, while the finished goods price index was relatively unchanged. The year-over-year raw materials index fell slightly, while the finished goods price index was flat. The future raw materials price index decreased from 47 to 35, and the future finished goods price index also reduced from 30 to 25. This means that manufacturers plan to hold price increases over the next six months and not pass on increased input costs to customers.